Shares and Debentures
Q.4 (1) Shares and Debentures
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| Points | Shares | Debentures |
|---|---|---|
| Meaning | A share is a unit of the share capital of a company. | A debenture is an acknowledgement of debt taken by the company. |
| Status of holder | Shareholders are owners of the company. | Debentureholders are creditors of the company. |
| Return | Dividend, which depends on profits and is not compulsory. | Interest at a fixed rate, payable even if there is a loss. |
| Nature of return | Dividend is an appropriation of profit. | Interest is a charge on profit. |
| Voting rights | Equity shareholders have voting rights. | Debentureholders have no voting rights. |
| Security | Share capital is not secured. | Debentures are usually secured by a charge on assets. |
| Repayment | Share capital is not repaid during the life of the company (except redeemable preference shares or buy-back). | Debentures are generally redeemed after a fixed period. |
| Priority on winding up | Repaid after all creditors are paid. | Repaid before shareholders. |
| Conversion | Shares cannot be converted into debentures. | Convertible debentures can be converted into shares. |
Doubtly AI
· 28 Oct 2026
AI-verified · Oct 2026
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